Question & AnswerQ&A (BSP CIRCULAR NO. 185)
ABS refers to certificates issued by a Special Purpose Trust representing undivided ownership interest in an Asset Pool.
Any bank, non-bank with quasi-banking functions (NBQB), including its subsidiaries and affiliates engaged in allied activities, domiciled in the Philippines may securitize its assets upon prior approval of the Bangko Sentral ng Pilipinas (BSP).
The Originator is a bank, NBQB, and/or its subsidiary or affiliate engaged in allied activities that grants or purchases loans or receivables and assembles them into a pool for securitization.
Minimum documents include a Trust Indenture, a Prospectus, specimens of Application to Purchase ABS, and specimens of the Certificate, all containing specific required information as detailed in the circular.
The clean-up call is an option granted to the Seller to purchase the remaining Assets in the Asset Pool once the outstanding principal balance falls to ten percent or less of the original principal balance.
Disclosures must include that ABS do not represent deposits or liabilities of the Originator, Servicer or Trustee; they are not insured by PDIC; investors bear investment risk; the Trustee does not guarantee principal value or collectibility; and investors' rights.
True sale means the assets are transferred beyond the reach of the Seller and its creditors, the SPT has the right to pledge or exchange its interests in the assets, and the Seller does not maintain effective control over the transferred assets by any concurrent agreement.
The Trustee shall be the trust department of a bank licensed to do business in the Philippines.
Prohibited activities include designating the trust department of the Seller, its subsidiaries/affiliates, parent bank, or their subsidiaries/affiliates as Trustee; directors or employees serving on both entities simultaneously; and using ABS as collateral for loans from the originating bank/NBQB.
Violations are subject to the penalties prescribed under Section 37 of Republic Act No. 7653.